Weekly Market Outlook – This week is loaded with economic data that could influence interest rate decisions. As the world mourns the passing of Queen Elizabeth this week, the Bank of England postponed its upcoming interest rate decision meeting to September 22nd. Nevertheless, data releases will continue as planned. The US CPI report’s release will provide some insight into the Fed’s September 21st meeting expectations. It is expected that the BOE will increase rates by 75bps after the RBA, the BOC, and the ECB all hiked rates by 50bps. In the APAC region, the Australian and New Zealand dollars await local employment and GDP data, respectively.
The BOC increased its key rate by 75 basis points to 3.25%. As with the Reserve Bank, the BOC said inflationary conditions will necessitate a further rate rise. A few months will be needed for inflation to return to 2%, according to Rogers of the BOC. Is the BOC going to hike again in its next meeting? The Employment Change for August was released by Canada on Friday. With -39,700 jobs lost over the past three months, the total is -113,500. Will the BOC continue to raise rates until a certain number of jobs are lost?
ECB rates were also raised from 0% to 0.75% by 75 basis points. The statement also stated that additional rate hikes are necessary to counter higher inflation expectations. Christine Lagarde, however, clarified that the central banks doesn’t have a predetermined path, and decisions will be made according to the meeting agenda.
It is expected that the central bank will opt for an 85% rate hike instead of a smaller 50bps increment at the September confab, after a strong August jobs report, upside surprises in the influential ISM business surveys for the month, and hawkish rhetoric from Fed officials. Many, however, have stressed that incoming data will be crucial to their decision at the September meeting.
Traders will be paying close attention to the impact the data has on expectations of how many hikes the Fed will fire this cycle. According to market expectations, the terminal rate will likely be raised in Q1 to the current range of 3.75-4.00% as a result of the more constructive tone of macro indicators in Q3. According to the Fed’s June forecasts (which will be updated in September), the terminal rate is expected to be 3.8% by 2023. According to analysts, if the Fed remains at the terminal for three to fifteen months on average, it could signal a rate-cutting cycle in H2-2023.
US Retail Sales: Retail sales are forecast to rise 0.2% M/M in August (prev. 0%), while ex-autos are also expected to rise 0.2% M/M (prev. 0.4%). “Retail sales have been performing well in recent months, but we maintain a weak outlook for real goods demand in the next few quarters,” Credit Suisse says. Consequently, the Fed’s explicit policy of slowing growth may result in sour sentiment and tightening financial conditions, while incremental shocks may cause a broader, unemployment-driven slowdown, skewed to the downside.
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Source: Weekly Market Outlook: US CPI, UK Data, RBA & RBNZ GDP to Watch
Key Data to watch on the Economic Calendar this week
Monday:- UK: GDP (JUL)
- UK: Manufacturing Production (JUL)
- UK: Industrial Production (JUL)
- US: CPI (AUG)
- UK: Inflation data (AUG)
- US: PPI Final Demand (AUG)
- New Zealand: GDP
- Australia: Employment Change (AUG)
- US: Retail Sales (AUG)
- US: Empire State Manufacturing Index (SEP)
- UK Retail Sales (Aug)
- EU: CPI Final (AUG)
- US: Consumer Sentiment Prelim (SEP)
Global — Central Banks
The RBA, BOC, and ECB all hiked interest rates last week and intend to raise them again in the near future. In a statement, the RBA said it expects to increase interest rates in the months ahead so inflation can fall to its target of 2% to 3%. However, RBA Governor Lowe hinted on Thursday that tightening might be slowed. Accordingly, next month’s RBA meeting is expected to only include a 25bps hike.
The BOC increased its key rate by 75 basis points to 3.25%. As with the Reserve Bank, the BOC said inflationary conditions will necessitate a further rate rise. A few months will be needed for inflation to return to 2%, according to Rogers of the BOC. Is the BOC going to hike again in its next meeting? The Employment Change for August was released by Canada on Friday. With -39,700 jobs lost over the past three months, the total is -113,500. Will the BOC continue to raise rates until a certain number of jobs are lost?
ECB rates were also raised from 0% to 0.75% by 75 basis points. The statement also stated that additional rate hikes are necessary to counter higher inflation expectations. Christine Lagarde, however, clarified that the central banks doesn’t have a predetermined path, and decisions will be made according to the meeting agenda.
USD — US CPI in Focus
Inflation in the US is expected to decline by 0.1% M/M in August (vs unchanged in July), which would mark the first quarterly decline in two years; core inflation, however, is expected to rise to +0.4% M/M (prev. +0.3%). It is expected that the data release will play a crucial role in determining expectations for the FOMC’s September 21st meeting. If the reading is hot, the central bank would likely act more aggressively, as it prioritizes capping price pressures over supporting growth, whereas if it were soft, it would likely opt to act less aggressively.It is expected that the central bank will opt for an 85% rate hike instead of a smaller 50bps increment at the September confab, after a strong August jobs report, upside surprises in the influential ISM business surveys for the month, and hawkish rhetoric from Fed officials. Many, however, have stressed that incoming data will be crucial to their decision at the September meeting.
Traders will be paying close attention to the impact the data has on expectations of how many hikes the Fed will fire this cycle. According to market expectations, the terminal rate will likely be raised in Q1 to the current range of 3.75-4.00% as a result of the more constructive tone of macro indicators in Q3. According to the Fed’s June forecasts (which will be updated in September), the terminal rate is expected to be 3.8% by 2023. According to analysts, if the Fed remains at the terminal for three to fifteen months on average, it could signal a rate-cutting cycle in H2-2023.
US Retail Sales: Retail sales are forecast to rise 0.2% M/M in August (prev. 0%), while ex-autos are also expected to rise 0.2% M/M (prev. 0.4%). “Retail sales have been performing well in recent months, but we maintain a weak outlook for real goods demand in the next few quarters,” Credit Suisse says. Consequently, the Fed’s explicit policy of slowing growth may result in sour sentiment and tightening financial conditions, while incremental shocks may cause a broader, unemployment-driven slowdown, skewed to the downside.
Trade Central Banks Rate Decisions with AximTrade
Stay on top of all the important financial market activities by checking out our Economic Calendar and keep abreast of the market trends and reports with our Weekly Market Outlook from AximDaily.AximTrade strives to make every valuable information easily accessible and available to every trader, enhancing their market awareness and positively impacting their trading results. Now is the best time to open a forex account and start trading with the world’s most insightful forex-trading resource.
If you’re a novice in forex and finding it difficult to take advantage of market movements, try our CopyTrade platform and start trading like a pro from day one. Discover hundreds of successful trading portfolios and choose the best for you to follow.
Source: Weekly Market Outlook: US CPI, UK Data, RBA & RBNZ GDP to Watch